I'm also having a problem with my Phillips SDVD8820 drive, which is in my Gateway mx6932b laptop / Win XP Media Center SP2.
It is all ok with DVDs but usually thinks that any CD that I put in it is a new blank CD and asks me if I want to start burning files to it. I have noticed a couple of times that it has recognized CD's properly and then it would not recognize the same CD a short time later.
Since noticing the problem I have used the system restore DVD to reinstall Windows and the problem remains.
Do you think this is a hardware fault?